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Investment firms offer fractional stocks to entice younger customers

Experts say technology offers new options
Posted at 9:24 AM, Nov 01, 2019
and last updated 2019-11-01 12:24:16-04

SAN DIEGO (KGTV) - Charles Schwab is the latest large investment firm to offer fractional stocks as a way to get more people to invest.

The move puts more high-dollar, blue chip stocks within reach for younger customers.

"It's a big win to consumers in general," says Steven Fox, the owner of Next Gen Financial Planning. "That's particularly helpful for younger investors because they typically tend to have smaller accounts."

A recent report says that 66% of millennials say they're afraid of the stock market. Fox thinks it's because that generation watched their parents go through multiple downturns and were turned off by its volatility.

But, Fox says fractional stocks, and other new ideas from large companies are enticing more people to invest. He says many firms are starting to offer perks like zero-commission trades, fractional stocks, and on-line based accounts to help people save money and invest more.

"It may only be 1%, but for a lot of people over a long period of time, as you account grows more and more, that 1% can mean a difference of tens or hundreds of thousands of dollars that you would have available to pull out later in life."

Fox says it also helps people keep a more diverse portfolio. He says this is the start of a shift to more direct indexing, where investors will be able to use fractional stocks to create their own groups of investments, rather than buying pre-set mutual funds or indexes.

"You're gonna see more technology come out that makes it easy to do direct indexing and consumers are going to see more and more options here," says Fox.